liquefied natural gas (lng) import terminals: siting, safety and regulation

8/18/2019 Liquefied Natural Gas (LNG) Import Terminals: Siting, Safety and Regulation

1/30Congressional Research Service The Library of Congress

CRS Report for CongressReceived through the CRS Web

Order Code RL32205

Liquefied Natural Gas (LNG)Import Terminals:

Siting, Safety and Regulation

January 28, 2004

Paul W. ParfomakSpecialist in Science and Technology

Resources, Science, and Industry Division

Aaron M. FlynnLegislative Attorney

American Law Division


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Liquefied Natural Gas (LNG) Import Terminals:Siting, Safety and Regulation

Summary

Liquefied natural gas (LNG) is a hazardous fuel frequently shipped in large

tankers to U.S. ports from overseas. While LNG has historically made up a smallpart of U.S. natural gas supplies, rising gas prices, current price volatility, and thepossibility of domestic shortages are sharply increasing LNG demand. To meet thisdemand, energy companies have proposed building dozens of new LNG importterminals throughout the coastal United States. But many of these terminals wouldbe built onshore near populated areas, so local communities fear the terminals wouldexpose them to unacceptable safety and security hazards. Potentially catastrophicpool fires or vapor cloud fires could arise from a serious accident or attack on LNGinfrastructure. Faced with the widely perceived need for greater LNG imports, andpersistent public concerns about LNG safety, Congress is examining the adequacyof safety provisions in federal LNG siting regulation.

The Federal Energy Regulatory Commission (FERC) grants federal approval forthe siting of new onshore LNG facilities under the Natural Gas Act of 1938. Thisapproval process incorporates minimum safety standards for LNG established by theDepartment of Transportation, which, in turn, incorporate siting standards set by theNational Fire Protection Association (NFPA). Although LNG has had a record of relative safety for the last 40 years, and no LNG tanker or land-based facility hasbeen attacked by terrorists, experts have questioned the adequacy of key LNG sitingregulations related to safety zones, marine hazards, hazard modeling, and remotesiting. Experts have also questioned the validity of LNG hazard studies used byfederal regulatory agencies which suggest that LNG terminal risks, while significant,are not as serious as is popularly believed.

Congress may not see a compelling need to change current federal LNG sitingrequirements if it views the current regulations and processes as sufficient. Holdersof this view would continue to rely on the judgment of LNG experts in federalagencies and standards committees to appropriately balance local public safety withnational energy needs. While there have been some concerns about specificregulatory provisions, Congress may believe that the responsible governmentagencies are actively and cooperatively addressing these concerns. On the otherhand, Congress may conclude that some aspects of new LNG terminals do poseexcessive public risks, or that there is still too much uncertainty about key risks tomake final conclusions about public safety. In this case, Congress has several

options to further address LNG terminal safety concerns. These options include 1)banning onshore LNG terminals, 2) increasing local LNG siting authority, 3)imposing more stringent federal LNG safety standards, 4) encouraging more LNGresearch, 5) curbing U.S. natural gas demand, and 6) developing alternatives tonatural gas imports. Each of these policy alternatives has significant limitations,however, and may have undesirable consequences for national energy markets andother hazardous material infrastructure. This report will be updated as eventswarrant.


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Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Issues Facing Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Scope and Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2What Is LNG and Where Does It Come From? . . . . . . . . . . . . . . . . . . . . . . . 2Expectations for U.S. LNG Import Growth . . . . . . . . . . . . . . . . . . . . . . . . . . 2Proposed LNG Import Terminals in the United States . . . . . . . . . . . . . . . . . 3

Safety Hazards from LNG Terminals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Physical Hazards of LNG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Pool Fires . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Other Safety Hazards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Terrorism Hazards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Safety Record of LNG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Safety Regulations in Onshore LNG Siting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Department of Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Federal Energy Regulatory Commission (FERC) . . . . . . . . . . . . . . . . . . . . . 8

FERC-DOT Jurisdictional Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9National Fire Protection Association (NFPA) . . . . . . . . . . . . . . . . . . . . . . . 10State Regulatory Roles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Recent Safety Issues in LNG Terminal Siting . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Safety Exclusion Zones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

NFPA Perspectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13FERC Perspectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Marine Safety Hazards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Remote Siting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15LNG Hazard Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Hazards vs. Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18LNG Terminal Safety in Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Other Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Terror Attractiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Civil and Criminal Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Policy Options for Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Banning Onshore LNG Terminals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Increasing State Siting Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Setting More Stringent Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22Encouraging More Safety Research . . . . . . . . . . . . . . . . . . . . . . . . . . . 22Reducing LNG Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Appendix: Offshore LNG Terminal Regulation . . . . . . . . . . . . . . . . . . . . . . . . 25


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List of Tables

Table 1. Recently Proposed U.S. LNG Terminals . . . . . . . . . . . . . . . . . . . . . . . . . 4Table 2. Recent LNG Hazard Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17


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1 49 C.F.R. § 172.101. List of Hazardous Materials. Office of Hazardous Materials Safety,Department of Transportation.

Liquefied Natural Gas (LNG) Terminals:

Siting, Safety and Regulation

Introduction

Liquefied natural gas (LNG) has long played a role in U.S. energy markets, butconcerns about rising natural gas prices, current price volatility, and the possibilityof domestic shortages are sharply increasing demand for LNG imports. To meet thisdemand, dozens of new onshore and offshore LNG import terminals have beenproposed in coastal regions throughout the United States. But LNG is a hazardous1

liquid transported and stored in enormous quantities, often near populated areas.

Concerns exist about the safety hazards of new LNG import terminals and the federalgovernment’s role in addressing LNG safety in the terminal siting process. Inaddition, various energy policy proposals could impact the need for new LNGterminals by encouraging the development of alternative U.S. energy supplies andpromoting conservation.

This report provides an overview of recent industry proposals for new LNGimport terminals. The report summarizes LNG safety hazards and the industry’ssafety record. It summarizes federal laws and regulations related to LNG terminalsiting with a focus on the authorities of key federal agencies and safety provisions inthe permitting of onshore facilities. The report discusses controversial safety issues

in recent LNG siting proceedings, such as safety zones, marine hazards, hazardmodeling, and remote siting. The report outlines policy options related to LNGterminal safety, including 1) banning onshore terminals, 2) increasing local authority,3) imposing more stringent standards, 4) encouraging more LNG research, 5) curbinggas demand, and 6) developing alternatives to natural gas imports.

Issues Facing Congress

Proposed LNG terminals will directly impact the safety of communities in anumber of states and Congressional districts, and they are likely to influence energycosts nationwide. Faced with the widely perceived national need for greater LNGimports, and persistent public concerns about LNG hazards, some in Congress areexamining the adequacy of safety provisions in federal LNG siting regulation. If Congress concludes that new LNG terminals as currently regulated will pose anunacceptable risk to public safety, Congress may consider additional LNG safety-related legislation, or may exercise its oversight authority in other ways to influenceLNG terminal siting approval. Alternatively, Congress may consider other changesin U.S. energy policy legislation to reduce the nation’s demand for natural gas.


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2 Jowdy, M. “U.S. LNG Import Levels Double in 2003.” Oil Daily. Jan. 15, 2004. p5.

Scope and Limitations

This report focuses on industry and federal activities related to safety in LNGimport terminal siting. The report does not address the full range of state and localissues of potential interest to policy makers. The report also focuses on the potentialimpacts on communities and populations near an LNG terminal, rather than

employee safety and general security issues. (For a comprehensive discussion of LNG security see CRS Report RL32073, Liquefied Natural Gas (LNG) InfrastructureSecurity: Background and Issues for Congress, by Paul W. Parfomak.) This reportalso deals primarily with those parts of LNG terminals which transfer, store andprocess LNG prior to injection to natural gas pipelines for transmission off site. Formore discussion of general natural gas or pipeline hazards see CRS Report RL31990,Pipeline Security: An Overview of Federal Activities and Current Policy Issues, byPaul W. Parfomak. Last, this report discusses mostly onshore facilities and near-shore shipping, since they pose the greatest public hazards. Offshore LNG terminalsiting regulations are summarized in the Appendix.

Background

What Is LNG and Where Does It Come From?

When natural gas is cooled to temperatures below minus 260° F it condensesinto liquefied natural gas, or LNG. As a liquid, natural gas occupies only 1/600th thevolume of its gaseous state, so it is stored more effectively in a limited space and ismore readily transported. A single tanker ship, for example, can carry hugequantities of LNG — enough to supply the daily energy needs of over 10 millionhomes. When LNG is warmed it “regasifies” and can be used for the same purposes

as conventional natural gas such as heating, cooking, and power generation.

In 2003, LNG imports to the United States originated primarily in Trinidad(77%), Algeria (10%), and Nigeria (9%). Some shipments also came from Qatar,Oman, and other countries.2 Malaysia, Brunei, Australia, Indonesia, and the UnitedArab Emirates also export LNG, and may be significant U.S. suppliers in the future.In addition to importing LNG to the lower 48 states, the United States exportsAlaskan LNG to Japan.

Expectations for U.S. LNG Import Growth

The United States has used LNG commercially since the 1940s, but LNGimports have until recently been small because low domestic natural gas prices madeimports uncompetitive. In 2002, for example, LNG imports accounted for only 1%of total U.S. gas consumption. Among several countries with limited domestic gasreserves, however, LNG imports are substantial. Japan, for one, imports 97% of itsnatural gas supply as LNG — several times as much LNG as the United States.South Korea, France, Spain, and Taiwan are also large LNG importers.


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3 Greenspan, A., Chairman, U.S. Federal Reserve Board. “Natural Gas Supply and DemandIssues.” Testimony before the House Energy and Commerce Committee. June 10, 2003.

4 Yergin, Daniel and Stoppard Michael. “The Next Prize.” Foreign Affairs. Nov./Dec. 2003.

5 Zeus Development Corp. “Six New Offshore Terminal Designs May Expedite LNGDeliveries.” Latin Petroleum Analytics. Houston, TX. June 11, 2003.

Natural gas demand has accelerated in the U.S. over the last several years dueto environmental concerns about other energy sources, widespread building of naturalgas-fired electricity generation, and low natural gas prices through the 1980s and1990s. Domestic gas supplies have not kept up with this demand, however, so priceshave recently become high and volatile. At the same time, international prices forLNG have fallen substantially because of increased supplies and lower production

and transportation costs, making LNG more competitive with domestic natural gas.

In recent testimony before Congress, the Federal Reserve Chairman called fora sharp increase in LNG imports to help avert a potential barrier to the U.S. economicrecovery. According to the Chairman’s testimony: “... high gas prices projected in theAmerican distant futures market have made us a potential very large importer...Access to world natural gas supplies will require a major expansion of LNG terminalimport capacity.”3 If current natural gas trends continue, industry analysts predictthat LNG imports could increase to 20% of total U.S. gas supply by 2020.4

Proposed LNG Import Terminals in the United States

LNG tankers unload their cargo at dedicated marine terminals which store andregasify the LNG for distribution to domestic markets. Onshore terminals consist of docks, LNG handling equipment, storage tanks, and interconnections to regional gastransmission pipelines and electric power plants. Offshore terminals regasify andpump the LNG directly into offshore natural gas pipelines or may store LNG inundersea salt caverns for later injection into offshore pipelines.

There are five active onshore LNG import terminals in the United States atEverett, Massachusetts; Lake Charles, Louisiana; Cove Point, Maryland; Elba Island,Georgia; and Peñuelas, Puerto Rico. There is also an export terminal in Kenai,Alaska. In addition to these active terminals, developers have been proposingnumerous new LNG import terminals in the coastal United States. Table 1 listssummary information for recent LNG terminal proposals. As Table 1 shows, manyproposed LNG terminals would be located offshore, in part to avoid communityopposition and siting obstacles which have delayed or prevented the construction of new on-shore LNG terminal facilities.5 Additional terminals to serve U.S. marketshave also been proposed in the Bahamas, Mexico, and Canada.


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Table 1. Recently Proposed U.S. LNG Terminals

Location Name Developer Type Permit Status

Valdez, AK Valdez Yukon Pacific Onshore Approved*

Mobile, AL Mobile Bay Exxon Mobil Onshore Applying 2004

Mobile, AL Pinto Island Cheniere Energy Onshore Studying feasibility

Oxnard, CA Cabrillo Port BHP Billiton Offshore Reapplying early 2004

Oxnard, CA Platform Grace Crystal / Chevron Offshore Studying feasibility

Long Beach, CA Long Beach Mitsubishi Onshore Application filed

Samoa, CA Humboldt Bay Calpine Onshore Studying feasibility

Vallejo, CA Mare Island Bechtel / Shell Onshore Developers withdrew

Tampa, FL Tampa Bay BP Onshore Developer withdrew

Gulf of Mexico, LA Liberty HNG Storage/ CGI Offshore Developers withdrew

Gulf of Mexico, LA Energy Bridge Excelerate Energy Offshore Application filed

Gulf of Mexico, LA Gulf Landing Shell Offshore Application filed

Gulf of Mexico, LA Main Pass McMoran Offshore Applying early 2004

Gulf of Mexico, LA Vermillion 179 HNG Storage/ CGI Offshore Studying feasibility

Gulf of Mexico, LA Port Pelican ChevronTexaco Offshore Approved

Hackberry, LA Cameron LNG Sempra Onshore Approved

Sabine Pass, LA Sabine Pass Cheniere Energy Onshore Application filed

Fall River, MA Weaver’s Cove Poten & Partners Onshore Application filed

Somerset, MA Somerset Somerset LNG Onshore Applying early 2004

Harpswell, ME Fairwinds Conoco / TCPL Onshore Studying feasibility

Sears Island, ME Sears Island Not disclosed Onshore Studying feasibility

Belmar, NJ Energy Bridge Excelerate Energy Offshore Studying feasibility

Logan Twp., NJ Crown Point BP Onshore Studying feasibility

Providence, RI Fields Point KeySpan Onshore Studying feasibility

Brownsville, TX Brownsville Cheniere Energy Onshore Studying feasibility

Corpus Christi, TX Corpus Christi Cheniere Energy Onshore Application filed

Corpus Christi, TX Corpus Christi Exxon Mobil Onshore Applying 2004

Corpus Christi, TX Corpus Christi Occidental Petrol. Onshore Studying feasibility

Freeport, TX Freeport Cheniere Energy Onshore Application filed

Ingleside, TX Ingleside ExxonMobil Onshore Studying feasibility

Sabine Pass, TX Golden Pass Exxon Mobil Onshore Application filed

*Export terminal; project is currently suspended by the developer.Source: Trade press; Company Web sites


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6 Bureau of Mines (BOM). Report on the Investigation of the Fire at the Liquefaction,Storage, and Regasification Plant of the East Ohio Gas Co., Cleveland, Ohio, October 20,1944. February, 1946.

7 Junnola, Jill et al. “Fatal Explosion Rocks Algeria’s Skikda LNG Complex.” Oil Daily.Jan. 21, 2004. p6.

8 Methane, the main component of LNG, burns in gas-to-air ratios between 5% and 15%.

9 Havens, Jerry. “Ready to Blow?” Bulletin of the Atomic Scientists. July/August 2003. p17.

10 Havens. 2003. p17.

11 Siu, Nathan et al. Qualitative Risk Assessment for an LNG Refueling Station and Reviewof Relevant Safety Issues. Idaho National Engineering Laboratory. INEEL/EXT-97-00827rev2. Idaho Falls, ID. February, 1998. p71.

Safety Hazards from LNG Terminals

The safety hazards associated with LNG terminals have been debated fordecades. A 1944 accident at one of the nation’s first LNG facilities which killed 128people initiated public fears about LNG hazards which persist today.6 Technologyimprovements and standards since the 1940's have made LNG facilities much safer,

but serious hazards remain since LNG is inherently volatile and is usually shippedand stored in large quantities. The January 2004 accident at Algeria’s Skikda LNGterminal which killed or injured over 100 workers has added to the currentcontroversy over LNG facility safety.7

Physical Hazards of LNG

Natural gas is combustible, so an uncontrolled release of LNG poses a hazardof fire or, in confined spaces, explosion. LNG also poses hazards because it is socold. The likelihood and severity of catastrophic LNG events have been the subjectof controversy. While questions remain about the credible impacts of specific LNG

hazards, there appears to be consensus as to what the most serious hazards are.

Pool Fires. If LNG spills near an ignition source, the evaporating gas in acombustible gas-air concentration will burn above the LNG pool.8 The resulting“pool fire” would spread as the LNG pool expanded away from its source andcontinued evaporating. A pool fire is intense, burning far more hotly and rapidly thanoil or gasoline fires.9 It cannot be extinguished — all the LNG must be consumedbefore it goes out. Because an LNG pool fire is so hot, its thermal radiation mayinjure people and damage property a considerable distance from the fire itself. Manyexperts agree that a large pool fire, especially on water (due to heat transfer), is themost serious LNG hazard.10

Other Safety Hazards. LNG spilled on water could (theoretically) regasifyalmost instantly in a “flameless explosion,” but an Idaho National EngineeringLaboratory report concluded that “transitions caused by mixing of LNG and water arenot violent.”11 LNG vapor clouds are not toxic, but they could cause asphyxiation by


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12 Siu. 1998. p62.

13 Siu. 1998. p63.

14 Quillen. 2002. p28.15 Skolnik, Sam. “Local Sites Potential Targets for Cyberterror.” Seattle Post-Intelligencer .Seattle, WA. Sept. 2, 2002.

16 Delano, Fisoye et al. “Introduction to LNG.” University of Houston Law Center, Institutefor Energy, Law and Enterprise. Houston, TX. January, 2003. p23.

17 Juckett, Don. U.S. Department of Energy (DOE). “Properties of LNG.” LNG Workshop.Solomons, MD. February 12, 2002.

18 Petroplus International, N.V. “Energy for Wales: LNG Frequently Asked Questions.”Internet home page. Amsterdam, Netherlands. August 4, 2003.

displacing breathable air.12 Such clouds rise in air as they warm, however,diminishing the threat to people on the ground. Extremely cold LNG could injurepeople or damage equipment through direct contact.13 The extent of such contactwould likely be limited, however, as a major spill would likely result in a moreserious fire. The environmental damage associated with an LNG spill would beconfined to fire and freezing impacts near the spill since LNG dissipates completely

and leaves no residue.14

Terrorism Hazards. LNG tankers and land-based facilities could bevulnerable to terrorism. Tankers might be physically attacked in a variety of waysto destroy their cargo — or commandeered for use as weapons against coastal targets.LNG terminal facilities might also be physically attacked with explosives or throughother means. Some LNG facilities may also be indirectly disrupted by “cyber-attacks” or attacks on regional electricity grids and communications networks whichcould in turn affect dependent LNG control and safety systems.15

Safety Record of LNG

The LNG tanker industry claims an impressive safety record over the last 40years; since international LNG shipping began in 1959, tankers have carried over33,000 LNG cargoes without a serious accident at sea or in port.16 LNG tankers haveexperienced groundings and collisions during this period, but none has resulted in amajor spill. The LNG marine safety record is partly due to the double-hulled designof LNG tankers. This design makes them more robust and less prone to accidentalspills than single-hulled oil, fuel, and chemical tankers like the Exxon Valdez, whichcaused a major Alaskan oil spill after grounding in 1989.17 LNG tankers also carryradar, global positioning systems, automatic distress systems and beacons to signalif they are in trouble. Cargo safety systems include instruments that can shutoperations if they deviate from normal as well as gas and fire detection systems.18

The safety record of onshore LNG terminals is more mixed. There areapproximately 40 LNG terminals (and more than 150 other LNG storage facilities)worldwide. Since 1944, there have been approximately 13 serious accidents at thesefacilities directly related to LNG. Two of these accidents caused single fatalities of facility workers — one in Algeria in 1977, and another at Cove Point, Maryland, in


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19 Junnola, Jill et al. Jan. 21, 2004. p6.

20 Hunter, Catherine. “Algerian LNG Plant Explosion Sets Back Industry Development.”World Markets Analysis. Jan. 21, 2004. p1.

21 Antosh, Nelson. “Vast Site Devastated.” Houston Chronicle. Jan. 21, 2004. pB1.

22 CH-IV International. pp6-12.

1979. On January 19, 2004, a fire at the LNG processing facility in Skikda, Algeriakilled an estimated 27 workers and injured 74 others. The Skikda fire completelydestroyed the processing plant and damaged a marine berth, although it did notdamage a second processing plant or three large LNG storage tanks also located atthe terminal.19 The Skikda accident did not injure the rest of the 12,000 workers atthe complex, but it was considered the worst petrochemical plant fire in Algeria in

over 40 years.20

According to press reports, early indications were that the accidentresulted from poor maintenance rather than a facility design flaw.21 Another threeaccidents at worldwide LNG plants since 1944 have also caused fatalities, but thesewere construction or maintenance accidents in which LNG was not present.22

Safety Regulations in Onshore LNG Siting

The Department of Transportation (DOT) and the Federal Energy RegulatoryCommission (FERC) are the federal agencies primarily responsible for the regulationof onshore LNG facilities. Although federal statutes do not explicitly designate the

relative jurisdiction of DOT and FERC, the agencies have clarified their rolesthrough interagency agreement. These roles and their relation to other authorities aresummarized below.

Department of Transportation

The DOT sets safety standards for onshore LNG facilities. The DOT’s authorityoriginally stemmed from the Natural Gas Pipeline Safety Act of 1968 (P.L. 90-481)and the Hazardous Liquids Pipeline Safety Act of 1979 (P.L. 96-129). These actswere subsequently combined and recodified as the Pipeline Safety Act of 1994 (P.L.102-508), and amended again in 2002 by the Pipeline Safety Improvement Act (P.L.

107-355). Under the resulting statutory scheme, DOT is charged with issuingminimum safety standards for the siting, design, construction, and operation of LNGfacilities.

The Pipeline Safety Act, as amended, includes the following provisionsconcerning LNG facility siting (49 U.S.C. § 60103):

The Secretary of Transportation shall prescribe minimum safety standards fordeciding on the location of a new liquefied natural gas pipeline facility. Inprescribing a standard, the Secretary shall consider the —

(1) kind and use of the facility;

(2) existing and projected population and demographic characteristicsof the location;


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23 National Fire Protection Association (NFPA). Standard for the Production, Storage, and Handling of Liquefied Natural Gas, 1996 Edition. NFPA 59A. Quincy, MA. 1996.

24 Act of June 21, 1938, ch. 556, 52 Stat. 812, (codified as amended at 15 U.S.C. §§ 717 et seq).

25 The Department of Energy Organization Act of 1977 (P.L. 95-91) transferred to theEnergy Secretary the original NGA authority to approve siting, construction and operationof onshore LNG facilities (§ 301b). The Secretary, in turn, delegated this authority to FERC.

(3) existing and proposed land use near the location;(4) natural physical aspects of the location;(5) medical, law enforcement, and fire prevention capabilities near thelocation that can cope with a risk caused by the facility; and

(6) need to encourage remote siting.

General safety-related regulations may also impact siting decisions and affectthe operation of existing facilities. The statute requires the Secretary of Transportation to consider geophysical risks, proximity to populations, adequacy of emergency services, operator qualifications, and security measures whenpromulgating LNG facility rules (49 U.S.C. § 60103). The Secretary is authorizedto order corrective action if operating an LNG facility could be hazardous to life,property, or the environment (49 U.S.C. §§ 60112, 60117). DOT’s implementingregulations for the Pipeline Safety Act, as amended, are in 49 C.F.R.§§ 191-199.Safety standards, including those on siting, for LNG facilities are in 49 C.F.R. § 193and are overseen by the Department’s Office of Pipeline Safety within the Researchand Special Programs Administration.

The siting provisions in 49 C.F.R. § 193 incorporate by reference standard 59Afrom the National Fire Protection Association (NFPA).23 NFPA 59A requiresthermal exclusion zones and flammable vapor-gas dispersion zones around LNGterminals (§§ 193.2057, 193.2059). While it establishes these minimal sitingrequirements, DOT does not itself approve or deny specific siting proposals, withsuch authority instead vested in the Federal Energy Regulatory Commission. TheDOT regulations also adopt many of NFPA’s design and construction guidelinesincluding requirements for LNG facilities to withstand fire, wind, hydraulic forces,and erosion from LNG spills (§§ 193.2067, 193.2155, 193.2301). Other provisionsaddress operations (§§ 193.2501-2521), maintenance (§§ 193.2601-2639), employeequalification (§§ 193.2701-2719), and security (§§ 193.2901-2917).

Federal Energy Regulatory Commission (FERC)

Under the Natural Gas Act of 1938 (NGA),24 FERC grants federal approval forthe siting of new onshore LNG facilities.25 Section 7 of the Act authorizes FERC toissue certificates of “public convenience and necessity” for “the construction orextension of any facilities ... for the transportation in interstate commerce of naturalgas” (15 U.S.C. § 717f). Section 7 does not expressly cover LNG facilities, however,so recent agency policy has FERC exercising LNG siting regulation under its Section


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26 California Energy Commission (CEC). Liquefied Natural Gas in California: History, Risks and Siting. No.700-03-005. Sacramento, CA. at 16; 94 FERC 61,188 at 61,663.

27 In 1997, FERC reaffirmed its Section 3 authority despite changes to the Natural Gas Act

in the Energy Policy Act of 1992 (P.L. 102-486). For details see 97 FERC 61,231 (2001).Also note that FERC’s regulatory power regarding LNG importation under section 3 hasbeen held to allow the Commission to impose requirements equivalent to any in section 7,so long as the Commission finds them necessary or appropriate to the public interest.Distrigas Corp. v. FPC, 495 F.2d 1057, 1066 (D.C. Cir. 1974).

28 See 18 C.F.R. § 153; see also Foley, R. Federal Energy Regulatory Commission (FERC),Office of Energy Projects. “Liquefied Natural Gas Imports.” Slide presentation. Jan. 2003at 10.

29 Federal Energy Regulatory Commission (FERC), Office of Energy Projects. Personalcommunication. Dec. 10, 2003.

3 authority.26,27 Section 3 of the Act authorizes FERC to approve the import andexport of natural gas (15 U.S.C. § 717b). Specifically, FERC asserts approvalauthority over the place of entry and exit, siting, construction, and operation of newLNG terminals as well as modifications or extensions of existing LNG terminals.28

The FERC implements its authority over onshore LNG terminals through the

agency’s regulations at 18 C.F.R. § 153. These regulations detail the applicationprocess and requirements under Section 3 of the NGA. FERC’s requirements includedetailed site engineering and design information, evidence that a facility will safelyreceive or deliver LNG, and delineation of a facility’s proposed location (18 C.F.R.§ 153.8). Additional data are required if an LNG facility will be in an area withgeological risk (18 C.F.R. § 153.8). The regulations also require LNG facilitybuilders to notify landowners (18 C.F.R. § 157.6d) as is required with section 7approvals (18 C.F.R. § 153.3). Facilities to be constructed at the Canadian orMexican borders for import or export of natural gas also require a PresidentialPermit. According to FERC officials, applications under their Section 3-basedregulations are also sufficient for Presidential Permit purposes (18 C.F.R. §§153.15-153.17).29

Under the National Environmental Policy Act of 1969 (P.L. 91-190), FERCmust prepare an environmental impact statement in its review of an LNG terminalsiting application (18 C.F.R. § 380). FERC’s review requires 13 EnvironmentalResource Reports, five of which are applicable specifically to LNG facilities. Thesereports require analysis of, among other things, the socioeconomic impact of theLNG facility; geophysical characteristics of the site; safeguards against seismic risk;facility effects on air and noise quality; public safety issues in the event of accidentsor malfunctions; and facility compliance with reliability standards and relevant safetystandards (18 C.F.R. § 380.12). While FERC’s above-mentioned environmentalreport provisions do not direct the outcome of final Commission action, they could

have substantial impact on LNG siting decisions.

FERC-DOT Jurisdictional Issues. While FERC uses DOT standards, jurisdiction among the federal agencies with LNG oversight responsibilities has been


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30 S. REP. NO. 96-182 at 4 (1979).

31 See H.R. REP. NO. 1390 (1968), reprinted in 1968 U.S.C.C.A.N. 3223, 3251.

32 Chatanooga Gas Co., 51 FPC 1278, 1279 (1974).

33 See “Notice of Agreement Regarding Liquified Natural Gas,” 31 FERC 61,232 (1985).

34 FERC. Personal communication. Dec. 10, 2003.

35 National Fire Protection Assoc. (NFPA). About NFPA. Web site. Quincy, MA. 2003.

36 National Fire Protection Association (NFPA). Standard for the Production, Storage, and Handling of Liquefied Natural Gas, 2001 Edition. NFPA 59A. Quincy, MA. 2001.

(continued...)

a point of contention at times.30 In practice, FERC requires compliance with DOT’ssiting and safety regulations as a starting point, but can regulate more strictly if itchooses. This working arrangement is not explicitly established under the relevantfederal law. Neither do the statutes and regulations clearly define the roles of theagencies vis-a-vis one another. The revised Pipeline Safety Act, for example, states:

In a proceeding under section 3 or 7 of the Natural Gas Act (15 U.S.C. § 717bor 717f), each applicant ... shall certify that it will design, install, inspect, test,construct, operate, replace, and maintain a gas pipeline facility under ... section60108 of this title. The certification is binding on the Secretary of Energy and theCommission... (49 U.S.C. § 60104(d)(2)).

Despite this provision, which might appear to give DOT full control of gassafety regulation (including LNG siting authority), the authors of the associatedHouse committee report indicated their intention to preserve FERC jurisdiction overLNG.31 Accordingly, FERC has held that the Pipeline Safety Act does not removeits jurisdiction under the NGA to regulate LNG safety issues.32 In 1985, FERC andDOT executed a Memorandum of Understanding expressly acknowledging “DOT’s

exclusive authority to promulgate Federal safety standards for LNG facilities” butrecognizing FERC’s ability to issue more stringent safety requirements for LNGfacilities when warranted. This agreement appears to have resolved any jurisdictionalconflict between the agencies at that time.33 FERC, DOT and the United StatedCoast Guard (USCG) are currently negotiating another MOU to coordinate activitiesassociated with the spate of new terminal applications, but the details of this MOUare not yet public.34

National Fire Protection Association (NFPA)

As noted above, LNG terminal safety regulations incorporate standards set by

the NFPA. The NFPA is an international nonprofit organization which advocates fireprevention and serves as an authority on public safety practices. According to NFPA,its 300 safety codes and standards “influence every building, process, service, design,and installation in the United States.”35 The NFPA LNG Standards Committeeincludes volunteer experts with diverse representation from industry and government,including FERC, DOT, USCG, and state agencies. The NFPA standards for LNGsafety were initially adopted in 1967, with nine subsequent revisions, most recentlyin 2001.36 According to the Society of International Gas Tanker and Terminal


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36 (...continued)Note that federal laws still refer to the 1996 revision of this standard.

37 Society of International Gas Tanker and Terminal Operators (SIGTTO). Personalcommunication. London, England. Dec. 19, 2003.

38 Office of Pipeline Safety, programs website at http://ops.dot.gov/partnership.htm.

39 Office of Pipeline Safety, CY 2002, States Participating in the Federal/State CooperativeGas and Hazardous Liquid Pipeline Safety Programs (April 2002).

40 California Energy Commission, 2003 Integrated Energy Policy Report, Docket #02-IEP-01, Publication Number 100-03-019F at 29.

Operators (SIGTTO), although the NFPA standards originated in the United States,they were the first internationally recognized LNG standards and are widely usedthroughout the world today.37

State Regulatory Roles

While the federal government is primarily responsible for LNG terminal safetyand siting regulation, state and local laws, such as environmental, health and safetycodes, can affect LNG facilities as well. Under the Pipeline Safety Act, a state mayalso regulate intrastate pipeline facilities if the state submits a certification undersection 60105(a) or makes an agreement with the DOT under section 60106. Underthese provisions, a state “may adopt additional or more stringent safety standards”for LNG facilities so long as they are compatible with DOT regulations. (49 U.S.C.60104(c)). Of course, if a particular LNG facility would otherwise not fall underFERC and DOT jurisdiction, states may regulate without going through thecertification or agreement process. Regulation of inter state facilities remains theprimary responsibility of federal agencies. The Office of Pipeline Safety may,

however, authorize a state to “act as its agent to inspect interstate pipelines”associated with LNG facilities while retaining its enforcement responsibility.38 Asof 2002, all states but three were participants in the natural gas pipeline safetyprogram and fifteen were in the hazardous liquid pipeline safety program.39

State regulation of LNG facility safety and siting runs the gamut fromcomprehensive to piecemeal. In California, for example, the state EnergyCommission recently established the LNG Interagency Permitting Working Groupto coordinate its LNG terminal permitting process. The Working Group seeks “toensure that any LNG development is consistent with state energy policy that balancesenvironmental protection, public safety, and local community concerns.”40 Arizonasets out specific requirements for LNG storage facilities, including “peak shaving”plants used by regional gas utilities, consistent with DOT regulations for constructionmaintenance and safety standards (Ariz. Admin. Code R14-5-202, R14-5-203, 126-01-001). Colorado and Georgia have similarly comprehensive administrative systemsfor enforcing the federal standards (See 4 Co. Admin. Code 723-11; Ga. Admin.Code 515-9-3-.03).

Apart from state regulation aimed specifically at LNG facilities, generallyapplicable state and local laws, such as zoning laws and permit requirements forwater, electricity, construction, and waste disposal, also may serve to impact the


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41

New England LNG Co., Inc. v. City of Fall River, 331 N.E.2d 536 (Mass. 1975); see alsoTessa Meyer Santiago, Note, An Ounce of Preemption Is Worth a Pound of Cure: StatePreemption of Local Siting Authority As a Means for Achieving Environmental Equity, 21VA. ENVTL. L.J. 71, 104 (2002).

42 ANR Pipeline Co. v. Iowa State Commerce Comm’n, 828 F.2d 465, 466 (8th Cir. 1987);Algonquin LNG v. Loqa, 79 F. Supp. 2d 49, 49-50, 53 (D.R.I. 2000).

43 Federal Energy Regulatory Commission (FERC). Hackberry LNG Project: Final Environmental Impact Statement. FERC/EIS-0156. Washington, DC. Aug. 14, 2003. p4-65.

44 Raines, B. “Congress Wanted LNG Plants at ‘Remote’ Sites.” Mobile Register . Mobile,AL. Nov. 16, 2003.

planning and development of LNG facilities. However, with respect to LNG inparticular, local laws have been overridden by state legislation in the past.41 It shouldalso be noted that a federally authorized LNG project cannot be frustrated by contraryprovisions found in state or local law.42

Recent Safety Issues in LNG Terminal Siting

Proposals for new LNG terminal facilities have generated considerable publicconcern in many of the communities where the terminals would be built. Somecommunity groups and local officials fear that LNG terminals may expose them tounacceptable safety hazards, and that these safety hazards may not be appropriatelyevaluated in the federal siting approval process. They question the adequacy of safety exclusion zones and the lack of “remote siting” requirements in federalregulations. They are also concerned that FERC does not adequately account formaritime safety hazards associated with LNG tankers that would service newterminals. These issues are complicated by apparent contradictions among recent

LNG hazard studies, including those used by the federal government to evaluate LNGterminal hazards.

Safety Exclusion Zones

Federal safety regulations require LNG terminals to be surrounded by“exclusion zones” to protect neighboring communities in the event of a pool fire orflammable vapor cloud (49 C.F.R. §§ 193.2057, 2059). For FERC site approval, aprospective LNG terminal owner or a government agency must exercise “legalcontrol” of activities within such zones.43 Critics of these LNG safety provisionsargue that the thermal and vapor exclusion zones they specify may be too small, in

part because the “design spills” on which they are based are too small.44

They arguethat catastrophes such as terrorist attacks on storage tanks could release far moreLNG far more quickly than assumed in siting plans — resulting in larger, hotter poolfires or larger vapor clouds closer to nearby populations. Critics also argue thatfederally allowable levels of thermal radiation from pool fires are too high, sinceradiation at these levels could still burn people in a relatively short period of time.One recent report commissioned by opponents of the proposed Harpswell terminal,


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45 Fay, James A., Nov. 5, 2003. p5.

46 National Fire Protection Assoc. (NFPA). Technical Committee on Liquefied Natural Gas.Personal communication. Quincy, MA. Dec. 15, 2003.

47 NFPA. Personal communication. Dec. 15, 2003. See NFPA 58: Liquefied Petroleum GasCode, and NFPA 50B: Standard for Liquefied Hydrogen Systems.

48 British Standards Institute (BSI). EN 1473: Design of Onshore LNG Terminals. London,England. 1997.

49 Federal Energy Regulatory Commission (FERC). Freeport LNG Project: Draft Environmental Impact Statement. FERC/EIS-0164D. Washington, DC. Nov. 2003. p4-113.

50 SIGTTO. Personal communication. Jan. 5, 2004

51 NFPA 2001.

52 FERC. Nov. 2003. p4-120.

for example, concludes that “the federal safety requirements ... will not prevent harmto humans outside the site boundary for the spill scenarios that FERC considers.”45

NFPA Perspectives. The NFPA LNG standards committee believes the 59Aexclusion zone provisions are adequate, striking an appropriate balance betweenpublic safety and the public need for LNG facilities. The NFPA maintains that,

unlike some critics’ assertions, the LNG committee based its standards not only ondeep technical expertise, but also on 30 years of practical experience with liquefiedgas facilities around the world. The NFPA has said there is no reason to change thecurrent design spill provisions, nor any evidence that the catastrophic failure of anonshore LNG tank is plausible.46

According to the NFPA, the LNG safety zone standards in 59A are morestringent than NFPA’s comparable standards for liquefied petroleum gases (e.g.,propane, butane) and liquefied hydrogen gas, which are more widespread in theUnited States and potentially more hazardous than LNG.47 FERC and other expertsalso consider the NFPA safety zone standard to be more stringent in important ways

than the European standard (EN 1473).

48

For example, the European standard seesno need to consider a fire scenario for certain “full containment” LNG tanks, so itsets no minimum distance to the property line for such tanks, as NFPA 59Arequires.49 Unlike NFPA 59A, however, EN 1473 uses a risk based, case-by-casestandard rather than a prescriptive standard, so only limited general conclusions canbe drawn by comparing their distinct safety zone provisions. The EN 1473committee acknowledges, however, that its standard could “possibly be manipulatedgiven a weak or ill informed national regulatory body.”50

The NFPA also believes its thermal radiation limits are appropriate. Accordingto federal regulation, thermal radiation from a design spill can be no more than 1,600Btu/ft2-hr at a “property line that can be built upon” or at an “outdoor assembly area

occupied by 50 or more persons” (NFPA 59A 2-2.3.1).51 This radiation level wouldburn an exposed person within approximately 30 seconds, but would not ignite awooden structure.52 The NFPA LNG standards committee acknowledges that heatexposure at 1,600 Btu/ft2-hr “is fatal quite quickly” and that this specific limit is


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53 NFPA. Personal communication. Dec. 15, 2003.

54 NFPA. Personal communication. Dec. 15, 2003.

55 FERC. Nov. 2003. pp4-119,120.

56 FERC. Nov. 2003. p4-121.

57 NFPA. Personal communication. Jan. 8, 2004.

58 Federal Energy Regulatory Commission (FERC). Office of Energy Projects. Personalcommunication. Dec. 10, 2003.

59 Raines, B. and Finch, B. “Who Gauges Tanker Hazard?” Mobile Register . Mobile, AL.Oct. 26, 2003.

“somewhat arbitrary.”53 Nonetheless, the NFPA believes there would be sufficientalarm or other warning in an LNG release to allow potentially exposed individualstime to seek shelter or move further away from the exclusion zone before injury.Based on the its field experience, the NFPA believes the current thermal limit isreasonable and has no plans to revise it.54

FERC Perspectives. Like NFPA, FERC officials believe the design spill andexclusion zone requirements in the DOT regulations are adequate to ensure publicsafety. In its recent draft evaluation of the proposed Freeport LNG terminal, theCommission does calculate thermal exclusion zones based on a major storage tank design spill. This spill assumes the release of 46.5 million gallons of LNG from anonshore storage tank, approximately 110% of the total tank capacity, resulting in athermal exclusion zone of 914 feet from the tank.55 The largest flammable vaporexclusion zone FERC considers, however, is based on a spill of approximately220,000 gallons in the process area drain, resulting in a vapor exclusion zone of 2,111 feet from the drain.56 FERC’s report does not consider vapor dispersion froma larger tank spill because the NFPA does not view such an event to be a credible

failure.

57

FERC officials acknowledge that the impact of potential terror attacks isunpredictable. Nonetheless, FERC maintains that the more extreme scenariossuggested by some LNG terminal opponents are too theoretical and do notrealistically reflect the actual configuration and physical characteristics of LNGterminal infrastructure, including the comprehensive safety and security featuresrequired in terminal design. For example, FERC officials disagree with theproposition that the entire contents of an LNG storage tank can spill instantly inFERC’s view “like lifting an upside-down dixie cup” as suggested by some critics.58

Marine Safety Hazards

In addition to concerns about the adequacy of mandated safety exclusion zones,communities near proposed LNG terminals fear that FERC does not adequatelyaccount for potential safety hazards from LNG tankers serving those terminals.59 Asnoted earlier in this report, LNG spills on water are potentially more dangerous thanspills on land because LNG may spread much more quickly over water and is notreadily contained. Consequently, some experts believe an LNG tanker accident orattack resulting in a major spill could pose a hazard to coastal communities along the


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60 Fitzgerald, Jay. “Mayor: Ban LNG ships in Hub.” Boston Herald . Nov. 8, 2003. p19.

61 FERC. Office of Energy Projects. Personal communication. Dec. 10, 2003.

62 FERC. Nov. 2003. p4-132.

63 Raines, B. and Finch, B. “Study Talks of Possible LNG Disaster as Result of Accident.” Mobile Register . Mobile, AL. Oct. 22, 2003.

64 FERC. Nov. 2003. p4-129.

65 Parfomak, P. Liquefied Natural Gas (LNG) Infrastructure Security: Background and Issues for Congress. RL32073. Congressional Research Service. Washington, DC. Sept. 9,2003.

tanker’s route. These concerns have led, for example, to (unsuccessful) attempts bythe mayor of Boston to permanently suspend LNG shipments to the Everett terminalpassing through Boston harbor.60

FERC officials have stated that there are no federal requirements for marineexclusion zones around LNG tankers analogous to exclusion zones around onshore

facilities — and that such requirements are unnecessary. The USCG has primary jurisdiction over LNG shipping and marine transfer facilities. Nonetheless, FERCbelieves “looking at marine risk in LNG siting applications is required under thefounding principles of the National Environmental Policy Act.”61 In its LNG reviewof the Freeport LNG terminal application, for example, FERC does examine thepotential effects of ship-to-ship and ship-to-shore collisions, accidental grounding,and certain “credible” terror attacks.62 Terminal opponents have criticized FERC’suse of engineering models in marine hazard analysis, however, so the Commission’sconclusions based on these models have been controversial.63

In addition to FERC’s onshore operations requirements, LNG marine operationswould have to adhere to LNG vessel management procedures and emergency plansdeveloped by the regional USCG marine safety unit. These procedures wouldcontain requirements for pre-arrival notification, harbor transit, dock operations,cargo transfer, inspection, monitoring and emergency operations. FERC expects thekey provisions would include a moving safety zone around LNG ships set by theUSCG.64 Security of hazardous cargoes such as LNG is already subject to extensiverequirements such as security zones and harbor escorts under USCG maritimesecurity regulations to mitigate the possibility of an accident or attack.65

Remote Siting

As noted earlier in this report, the LNG safety provisions in the Pipeline SafetyAct require the Secretary of Transportation to “consider the ... need to encourageremote siting” of new LNG facilities (49 U.S.C. § 60103). But federal regulationscontain no remote siting requirements, relying instead on safety exclusion zones toprotect the public. This regulatory alternative was criticized by the GeneralAccounting Office (GAO) in 1979 testimony to Congress supporting remote sitingin the Pipeline Safety Act:


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66 Peach, J.D. General Accounting Office (GAO), Director, Energy and Minerals Division.Testimony to the Senate Committee on Commerce, Science and Transportation.

Washington, DC. April 25, 1979. p10.67 Raines, B. “Congress Wanted LNG Plants at ‘Remote’ Sites.” Mobile Register . Mobile,AL. Nov. 16, 2003.

68 Tobin, L.T. Remarks at a meeting of the City of Vallejo Seismic Safety Commission.Meeting minutes. Vallejo, CA. Sept. 11, 2003. p5. See also: Federal Register. Vol.62.No.37. Feb. 25, 1997. pp8402-8403.

69 California Energy Commission (CEC). “LNG Worldwide.” Commission website at[http://www.energy.ca.gov/lng/international.html]. Link active as of Jan. 28, 2004.

70 Editorial. “An Independent LNG Study Urgently Needed.” Mobile Register . Nov. 9, 2003.

We believe remote siting is the primary factor in safety. Because of theinevitable uncertainties inherent in large-scale use of new technologies and thevulnerability of the facilities to natural phenomena and sabotage, the public can

be best protected by placing these facilities away from densely populated areas.66

More recently, Representative Edward Markey, an original sponsor of the Pipeline

Safety Act, has expressed concern that DOT regulations do not go far enough incomplying with the congressional intent of the remote siting provisions.67

But industry and government officials maintain that exclusion zones do provideadequate public safety based on the current state of knowledge about LNG. Theyargue that LNG terminals are no longer a new technology and face far feweroperational uncertainties than in 1979. In particular, some experts believe that hazardmodels in the 1970's were too conservative. They believe that more recent modelshave led to a better understanding of the physical properties of LNG, and,consequently, a better basis for design decisions affecting public safety.68 They pointout that LNG terminals like those in Everett, Massachusetts (1971); Barcelona, Spain(1969); Fezzano, Italy (1969); and Pyongtaek, Korea (1986) have been operating for

decades near populated areas without a serious accident affecting the public. Of the40 existing LNG terminals in Japan, a seismically active country, 24 are near majorcities such as Tokyo and Osaka.69 While the recent Algerian terminal accident wasquite serious, experts point out that it did not lead to the catastrophic failure of themain LNG storage tanks and did not cause injuries the general public.

LNG Hazard Models

A number of technical studies since the terror attacks of September 11, 2001,have been commissioned to reevaluate the safety hazards of LNG terminals andassociated shipping (Table 2). These studies have caused controversy because some

reach differing conclusions about the potential public hazard of LNG terminalaccidents or terror attacks. Consequently, community groups fear that LNG hazardsmay be misrepresented by government agencies, or that certain LNG hazards maysimply not be understood well enough to support a terminal siting approval.70 Forexample, recent press articles suggest that federal agencies may have underestimated


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71 Anonymous. “LNG Safety Questions.” Long Beach Press-Telegram. Long Beach, CA.Public forum section. Dec. 20, 2003.

72 Gas Research Institute (GRI). “LNGFIRE: A Thermal Radiation Model for LNG Fires”Version 3. GRI-89/0176. Washington, DC. June 29, 1990; “LNG Vapor DispersionPrediction with the DEGADIS: Dense Gas Dispersion Model.” GRI-89/00242; “Evaluationof Mitigation Methods for Accidental LNG Releases. Vol. 5: Using FEM3A for LNGAccident Consequence Analyses.” GRI 96/0396.5. Washington, DC.

73 FERC. Nov. 2003. p4-133.

74 Waryas, Edward. Lloyd’s Register Americas, Inc. “Major Disaster Planning:Understanding and Managing Your Risk.” Fourth National Harbor Safety CommitteeConference. Galveston, TX. March 4, 2002. Summary excerpts are in this presentation.

75 Juckett, Don. U.S. Department of Energy (DOE). “Properties of LNG.” LNG Workshop.Solomons, MD. February 12, 2002. Quest study summary are in this presentation.

76 Fay, James A. “Public Safety Issues at the Proposed Harpswell LNG Terminal.” FairPlayfor Harpswell. Harpswell, ME. Nov. 5, 2003.

77 Tobin & Assoc. “Liquefied Natural Gas in Vallejo: Heath and Safety Issues.” FinalReport by the LNG Safety Committee of the Disaster Council, Vallejo, CA. Jan.16, 2003.

the possibility of a catastrophic chain-reaction explosion arising from the breach of an LNG ship.71

Most hazard analyses for LNG terminals and shipping depend on computermodels to approximate the effects of hypothetical accidents. Federal siting standardsspecifically require computer modeling of thermal radiation and flammable vapor

cloud exclusion zones (49 C.F.R. §§ 193.2057, 2059).72

Such models are necessarybecause there have been no major LNG incidents of the type envisioned in LNGsafety research and because historical LNG safety experiments have been limited inscale and scope. But LNG hazards models are extremely complex and inherentlyuncertain, relying on calculations and input assumptions about which fair-mindedanalysts may legitimately disagree. Even small differences in an LNG hazard modelhave led to significantly different conclusions. Referring to the recent LNG safetyzone studies, for example, FERC notes that “distances have been estimated to rangefrom 1,400 feet to more than 4,000 feet for [hazardous] thermal radiation.”73

Table 2. Recent LNG Hazard Studies

Author Sponsor Subject

Lloyd’s Register of Shipping74

Distrigas (Tractebel) Focused analysis models possible terrorattacks on LNG ships serving Everett

Quest Consultants Inc.75 DOE (lead), FERC, DOT Models catastrophic breach of an LNG shiptank

James Fay (MIT)76 Fair Play for Harpswell Models fire and vapor hazards of proposedHarpswell LNG terminal

Tobin & Associates77 City of Vallejo Reviews general safety of proposed MareIsland LNG terminal


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78 Lehr, W. and Simecek-Beatty, D. “Comparison of Hypothetical LNG and Fuel Oil Fireson Water” (Draft). National Oceanic and Atmospheric Administration (NOAA). Nov. 2003.

79 Anonymous. “Author Claims Natural Gas Tanker Port Study Being Misused.” Dow Jones Newswires. Dec. 5, 2003.

80 FERC. Nov. 2003. p4-133.

81 FERC. Nov. 2003. p4-134.

Lehr and Simecek-Beatty78

NOAA Draft report compares hypothetical LNG andfuel oil fires on water

Sandia NationalLaboratory79

DOE Will examine effect of large scale LNG spillon water

To be determined FERC (lead), DOT, USCG Will model LNG marine safety hazards

Source: Congressional Research Service.

The LNG hazard studies in Table 2 have been sponsored by a range of stakeholders and have been performed by individuals with various expertises. It isbeyond the scope of this report to make detailed comparisons of the methodologiesand findings of these studies and FERC analysis. Furthermore, not all of thesereports are publicly available, and two are yet to be completed. Nonetheless, each of the available studies (or its application) appears to have significant limitations, or hasbeen questioned by critics. In its most recent LNG siting review, FERCacknowledges that “opportunity exists to refine ... assumptions and provide a morerealistic assessment of the ‘worst case’ hazards.”80 But the Commission alsodisagrees with the planning implications of “worst case” scenarios put forth by LNGterminal opponents. According to FERC,

The various approaches to estimate a ‘worst case’ scenario should not bemisconstrued as defining an exclusionary zone. Rather the “worst case”scenarios provide guidance ... in establishing potential impact areas foremergency response and evacuation planning.81

Hazards vs. Risks. In reviewing the various LNG hazard studies becomingavailable, it is important to be clear about the distinction between hazards and risks.While theoretical models may try to quantify the effects of worst-case hazards,evaluating the risks associated with those hazards requires an estimate of the

probability that they will occur. It is often argued that a significant hazard which isnonetheless highly unlikely does not represent an unacceptable risk to the public. Inthis view, worst-case hazard studies alone do not provide a sufficient basis forevaluating public safety. Unfortunately, few LNG safety studies comprehensivelyand convincingly address the probability of catastrophic accidents or attacks actuallyoccurring. In part, this shortcoming arises from a lack of historical LNG incidentsand detailed terrorist threat information on which to base such probabilities. Facedwith this analytic uncertainty, decision makers are forced to draw the bestinformation they can get and rely upon their own best judgment to reach conclusionsabout LNG safety.


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82 Based on facilities submitting Risk Management Plans required under Section 112 of theClean Air Act (42 U.S.C. § 7412) and classified in the December 1, 2003 update of the EPANational Database using EPA’s software RMP*Review (v2.1). EPA notes that an entirepopulation is highly unlikely to be affected by any single chemical release, even in the worstcase. In an actual release, effects on a population would depend on wind direction and manyother factors. In addition, these worst-case scenarios do not account for emergency responsemeasures facility operators or others might take to mitigate harm.

83 Office of Hazardous Materials Safety, Department of Transportation. Hazardous Materials Shipments. Washington, DC. October, 1998. Table 2. p2.

84 Behr, Peter. “Higher Gas Price Sets Stage for LNG.” Washington Post . Washington,D.C. July 5, 2003. pD10.

85 National Fire Protection Assoc. (NFPA). Technical Committee on Liquefied Natural Gas.Personal communication. Quincy, MA. Dec. 15, 2003.

86 Office of Congressman Edward J. Markey. Personal communication. Jan. 5, 2004.

87 Resnick-Ault, Jessica. “Gas Industry Defends Safety of Sending Behemoth Tanker to New(continued...)

LNG Terminal Safety in Perspective

Other Hazardous Materials. LNG terminals and tankers have a high profiledue to recent media coverage, although there are few of them relative to all thehazardous chemical plants and ships currently operating near U.S. cities. Accordingto the U.S. Environmental Protection Agency, for example, over 500 toxic chemical

facilities operate in “urban” areas at which worst-case accidents could affect 100,000or more people.82 These include chlorine plants in city water systems and ammoniatanks in agricultural fertilizer production. There are also oil refineries and otherliquefied petroleum gas (e.g., propane, butane) terminals operating in U.S. portswhich pose safety hazards similar to those of LNG. Based on data from the U.S.Office of Hazardous Materials Safety, there are over 100,000 annual U.S. shipmentsof hazardous marine cargo such as ammonia, crude oil, liquefied petroleum gases,and other volatile chemicals.83 Many of these cargoes pose a similar hazard to LNGand pass through the same harbors serving existing or proposed LNG terminals.

Terror Attractiveness. The attractiveness of LNG infrastructure to terrorists

has been the subject of debate since September 11, 2001. Many experts believe thatconcerns about terrorist threats to LNG may be overstated and should not impedeincreased LNG imports. They argue that deliberately causing an LNG catastropheto injure people would be extremely difficult and that LNG facilities are relativelysecure compared to other hazardous chemical infrastructure. The head of oneuniversity research consortium remarked, for example, “from all the information wehave ... we don’t see LNG as likely or credible terrorist targets.”84 Likewise, basedin part on consultations with the Federal Bureau of Investigation, NFPA’s LNGstandards committee has not seen a need to update the 59A standard in light of theSeptember 11, 2001, terror attacks.85 On the other hand, the Department of HomelandSecurity specifically identified LNG assets among a list of potential terrorist targetsin a security alert late in 2003.86 According to a senior USCG marine safety officerresponsible for LNG port security, “no one can guarantee that a terrorist incidentcan’t happen.”87


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87 (...continued)England Waters.” Providence Journal. Providence, RI. Jan. 4, 2004.

88 Anonymous. “Shell, Olympic Socked for Pipeline Accident.” Energy Daily. Jan. 22,2003.

89 Heilprin, John. “Ashcroft Promises Increased Enforcement of Environmental Laws for

Homeland Security.” Assoc. Press. Washington Dateline. Washington, DC. March 11, 2003.90 Nesmith, J. and Haurwitz, R.K.M. “Pipelines: The Invisible Danger.” Austin American-Statesman. Austin, TX. July 22, 2001.

91 Business Editors. “Olympic Pipe Line, Others Pay Out Record $75 Million in PipelineExplosion Wrongful Death Settlement.” Business Wire. April 10, 2002

92 National Transportation Safety Board (NTSB). Pipeline Accident Report PAR-03-01. Feb.11, 2003.

93 El Paso Corp. Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Form 10-Q. For the period ending June 30, 2002. Houston, TX.

Civil and Criminal Liability. One reason LNG tanker and terminal operatorsseek to ensure public safety is to avoid civil and criminal liability from an LNGaccident; there are no special provisions in U.S. law protecting the LNG industryfrom such liability. The 1989 Exxon Valdez oil spill, for example, cost Exxon over$1 billion in criminal and civil settlements for violations of federal and state laws.In January 2003, the Justice Department announced over $100 million in civil and

criminal penalties against Olympic Pipeline and Shell Pipeline resolving claims froma fatal pipeline fire in Bellingham, Washington in 1999.88 In March 2003,emphasizing the environmental aspects of homeland security, Attorney GeneralAshcroft announced a crackdown on companies failing to protect against possibleterrorist attacks on storage tanks, transportation networks, industrial plants andpipelines. He pledged to increase prosecution of civil and criminal cases, whereappropriate, to make companies comply with environmental and safety laws.89 Noteveryone believes, however, that Justice department scrutiny will ensure LNGinfrastructure safety. Public scrutiny of gas and hazardous liquids pipeline safetyafter the Bellingham accident, for example, raised concerns about energycompanies’commitment to safe operations and their often close relationships with

safety enforcement agencies.

90

Even if no federal or state regulations are violated, LNG companies still facecivil liability for personal injury or wrongful death in the event of an accident. In theBellingham case, for example, the pipeline owner and associated defendants agreedto pay a $75 million settlement to the families of two children killed in the accident.91

In 2002, El Paso Corporation settled wrongful death and personal injury lawsuitsstemming from a natural gas pipeline explosion near Carlsbad, New Mexico whichkilled 12 campers.92 Although the terms of those settlements were not disclosed, twoadditional lawsuits sought a total of $171 million in damages. The impact of theselawsuits on the company’s business is unclear, however; El Paso’s June 2003quarterly financial report noted that “our costs and legal exposure... will be fully

covered by insurance.”93


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94 Editorial Board. “Move ExxonMobil’s LNG Plant Offshore.” Mobile Register . Nov. 30,2003.

95 Shook, Barbara. “Environmental, Safety, Security Issues Add to Cost of Offshore LNG.”Oil Daily. Energy Intelligence Group. August 5, 2003.

Policy Options for Congress

A key question for Congress, with respect to the siting of new LNG terminals,is whether the regulation of these terminals appropriately balances the risk to publicsafety with the need for new natural gas supplies. On one hand, some may viewcurrent federal LNG siting requirements and processes as sufficient. Holders of this

view would continue to rely on the judgment of LNG experts in federal agencies andstandards committees to appropriately balance public safety with public needs.While there have been some concerns about regulatory jurisdiction, marine safety andhazard models, some may believe that the responsible government agencies areactively and cooperatively addressing these concerns. On the other hand, policymakers may believe that some aspects of new LNG terminals do pose excessivepublic risks, or that there is still too much uncertainty about key risks to make finalconclusions about public safety. In this case, Congress has several options to furtheraddress LNG terminal safety concerns.

Banning Onshore LNG Terminals. As some have suggested, Congress

could ban the construction of any new LNG terminals onshore in the belief that, dueto their hazards, such terminals simply should not be built anywhere near people.94

Many “remote siting” advocates would likely support such a ban. Indeed, as Table1 shows, developers have already proposed numerous offshore LNG terminals —largely to avoid public safety concerns. Others say an onshore LNG terminal banwould have several potential disadvantages. They argue that offshore LNG terminalsare generally more expensive than onshore terminals and further away fromconsumer markets, so an offshore requirement ultimately increases energy costscompared to a gas supply network with a mix of offshore and onshore facilities. Nooffshore LNG terminals have been built yet, so they may also need to overcometechnical challenges associated with their floating designs.95 Second, they argue, an

onshore terminal ban might by implication ultimately lead to the closure of theexisting onshore LNG terminals and LNG storage facilities used by regional gascompanies. Such closures could increase natural gas prices and volatility, and couldlead to immediate shortages in regions like New England with constrained pipelinesupplies. Third, they say, such a ban could set a precedent affecting a host of othereconomically critical but locally undesirable facilities. If new LNG terminals mustall be built offshore, they ask, will the same eventually be required of every otherhazardous material terminal or storage facility? Some say a federal policy move inthis direction could have unpredictable economic and environmental implications forall manner of trade and industrial production where public hazards exist.

Increasing State Siting Authorities. Since LNG terminal hazardsprimarily affect local communities, Congress could encourage a greater role for stateand local safety regulation in new terminal siting. LNG terminals are unusual amonghazardous chemical facilities in that the federal government plays the lead role in


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96 “Ala. Senator Cites Safety Fears Over LNG Plan.” Gas Daily. McGraw-Hill. Dec. 22,2003. p1.

safety regulation and site approval. For most other types of facilities storinghazardous materials, like water treatment plants and industrial refrigeration plants,state and local authorities have greater safety and siting approval authority. If statesor localities were given greater siting approval authority for LNG, they couldindividually adopt safety standards which might alleviate local community concerns.States are prohibited by law from setting safety standards for inter state pipeline

facilities and LNG terminals, although they may adopt “additional or more stringentsafety standards” for intrastate pipelines if those standards are compatible with theminimum federal standards (49 U.S.C. § 60103c).

Although devolving federal LNG siting authority to state and local agenciesmight alleviate local safety concerns, it might also create unintended andunacceptable barriers to LNG infrastructure development. State and local authorityover electric transmission siting, for example, has been widely criticized forpreventing or delaying new transmission projects critical to regional electricreliability due in many cases to local community opposition. For these reasons,legislative proposals have been made to increase, rather than decrease federal sitingauthority for new transmission. States would also likely require time to establish newLNG safety laws or regulations, unpredictably delaying new terminal development.

Setting More Stringent Standards. Congress could set more stringentprovisions in safety standards for new LNG terminals to address perceivedweaknesses in the existing standards. For example, provisions lowering allowableradiation thresholds for thermal exclusion zones, would effectively increase the sizeof those zones. Other provisions could mandate prescriptive hazard modeling forLNG tankers serving new terminals in the same way that onshore spill impacts mustbe modeled. But in setting more stringent safety provisions, technical justificationfor the alternative provisions might be needed, or the new standards might facegreater criticism for arbitrariness than the current ones. Time would also be needed

to fully understand the implications of these alternatives on future development of LNG infrastructure. Standards set too stringently, for example, might in effect equateto a ban on onshore facilities, with all the consequences of an explicit ban discussedabove. Alternatively, policy makers could act to adopt less prescriptive safetystandards like those in EN 1473, relying on facility-specific risk studies to evaluatesafety hazards. There is, however, no evidence that such standards consistently leadto safer LNG facilities. Furthermore, the inherent subjectivity of such standardsmight do little to quell debate about hazard analysis in sensitive locations.

Encouraging More Safety Research. As some in Congress havesuggested, Congress could call for additional LNG safety research to help reduce

uncertainties about specific LNG terminal or shipping hazards.96

A number of LNGterminal hazard reports have emerged in the last two years, and more are underway,but there appears to be widespread agreement among federal agencies, LNGdevelopers and community groups that additional “objective” LNG safety researchwould be beneficial. For example, physical testing (as opposed to computersimulations) of impacts and explosions on LNG tanker hulls by the USCG could fill


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important gaps in engineering knowledge about the potential effects of terroristattacks. Executing such a research program would have to be done within the nextyear, however, in order to influence pending applications for new LNG terminalconstruction. Such studies could also still be subject to the same types of technicallimitations and criticisms facing existing analysis, so while they may reduce keyuncertainties, they may not eliminate them altogether. These studies could also be

costly, especially if they involve field experiments on the scale of credible LNGaccidents.

Reducing LNG Demand. Congress could try to reduce the need for newLNG terminals by acting to curb growth in U.S. LNG demand, or growth in naturalgas demand overall. For example, Congress could change public and industrialincentives for conservation, switching to other fuels, or developing renewable energysupplies. But other fuels like coal and nuclear power pose their own hazards tocommunities and the environment, so their expansion may not be preferable toadditional LNG infrastructure. Conservation and renewable energy sources are lesshazardous, although they face significant technological and cost barriers to more

widespread public adoption. Federal investments in renewables research orconservation subsidies might have to be large, and might not have enough impact toalleviate the need for LNG expansion altogether. Various provisions in recentproposed energy legislation would encourage the development of conservation andother alternatives to natural gas, but critics believe they would not likely go farenough to significantly affect near-term natural gas consumption.

Another potential way to curb U.S. LNG demand would be to encourage greaterNorth American production of natural gas. Several recent energy policy proposalsseek to promote this objective, including proposals to encourage construction of anAlaskan gas pipeline and encourage production from marginal gas wells in NorthAmerica. An Alaska gas pipeline would take years to build, say opponents, and

would not on its own be able to meet the anticipated long-term growth in U.S. gasdemand. Increased production from natural gas wells in the lower 48 states couldhelp alleviate a possible near-term natural gas supply shortage, but may not offer asustainable long-term supply solution since domestic gas reserves may not be ableto keep pace with rising gas demand.

Conclusions

Proposals for new U.S. LNG import terminals are numerous, but LNG importspose significant safety challenges. LNG is inherently hazardous and its infrastructure

is potentially attractive to terrorists. The recent LNG terminal fire in Algeriademonstrates that, despite technological improvements since the 1940s, LNGfacilities can still experience serious accidents. Many lawmakers and the generalpublic are concerned about these hazards. The U.S. LNG industry is subject to moreextensive siting and safety regulation than many other similarly hazardous facilities.Federal, state and local governments have also put in place security measuresintended to safeguard LNG against newly perceived terrorist threats. Somecommunity groups and other stakeholders fear that federal siting requirements for


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97 Energy Information Administration (EIA), U.S. Dept. Of Energy. Annual Energy Outlook 2004 with Projections to 2025. DOE/EIA-0383(2003). Washington, DC. Jan. 2004.

LNG facilities are still not stringent enough, but the responsible federal agenciesdisagree.

The safety issues associated with LNG terminal siting are both important andfamiliar. Every major energy source poses some hazard to public safety. Similarpublic concerns have been raised around siting of other types of energy facilities such

as nuclear power plants, oil import terminals, pipelines, and electric transmissionlines. In the case of nuclear power, strict safety requirements and community sitingopposition, along with high construction costs, have helped block new plant ordersfor over 25 years. In evaluating new LNG terminal proposals, therefore, policymakers face a full range of facilities and safety hazards associated with U.S. energysupplies, not only LNG needs and hazards on their own.

Although LNG terminal regulations are extensive, and the global industry hasdecades of experience operating LNG facilities, many stakeholders question LNGterminal safety. Some of these questions might be resolved through focused andobjective research on key LNG topics. Rather than reaching potentially prematureconclusions about a particular LNG terminal proposal (either for or against) basedon incomplete engineering knowledge or press commentary, decision makers mightseek clearer understanding of LNG hazards through research. LNG siting decisionsare already underway, however, so any research efforts intended to affect the sitingprocess would probably have to be completed quickly. Revisiting federal LNG sitingdecisions may disrupt the ongoing development of LNG infrastructure and associatedenergy supplies. The construction and subsequent closure of the Shoreham nuclearpower plant in the 1980's due to new public safety requirements offers an exampleof the need to resolve safety concerns before capital is invested.

Both industry and government analysts project continued growth in the demandfor natural gas — and a decreasing ability for domestic gas producers to meet that

demand.97 Greater LNG imports represent one way to address this growth in demand,along with increased North American gas production, conservation, fuel-switching,and the development of renewable energy sources. One way or another thefundamental gas supply and demand balance must be maintained. If policy makersencourage LNG imports, then the need to foster the other energy options may bediminished — and vice versa. Thus decisions about LNG infrastructure could haveconsequences for a broader array of natural gas supply policies.


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98 For a recent LNG siting application, MARAD performed financial analysis and USCGevaluated environmental impacts; the agencies cooperated on all other aspects of the review.(“First Offshore Terminal in U.S. is About to Secure Federal License.” Foster Natural Gas Report . Bethesda, MD. Nov. 20, 2003. p21.

99 The statute defines natural gas to include “liquefied natural gas.” 33 U.S.C. § 1502(14).

100 Sierra B. Weaver, Note, Local Management of Natural Resources: Should LocalGovernments Be Able to Keep Oil Out?, 26 HARV. ENVTL. L. REV. 231, 246 (2002).

Appendix: Offshore LNG Terminal Regulation

Under the Deepwater Port Act of 1974 (P.L. 93-627) the Secretary of Transportation is directed to “authorize and regulate the location, ownership,construction, and operation of deepwater ports” (33 U.S.C. §§ 1501(a), 1503). TheSecretary has delegated this authority to the Maritime Administration (MARAD)

within the Department of Transportation, and to the Coast Guard (USCG), within theDepartment of Homeland Security.98 Originally, P.L. 93-627 applied only to offshoreoil ports and terminals and not LNG facilities. However, the MaritimeTransportation Security Act of 2002 (P.L. 107-295) amended P.L. 93-627 to includenatural gas facilities, including LNG terminals, developed offshore. As amended,“deepwater ports” are:

any fixed or floating manmade structure other than a vessel ... located beyondState seaward boundaries ... intended for use as a port or terminal for thetransportation, storage, or further handling of oil or natural gas for transportationto any State . . . (33 U.S.C. § 1502(9a))99

The Deepwater Port Act sets out a detailed process for offshore facility sitingapplications. The Act also authorizes regulations addressing potential threats to theenvironment or human welfare posed by development of offshore LNG facilities (33U.S.C. §§ 1504, 1508; 33 C.F.R. § 148). The Act also requires regulations for thedesignation of safety zones around deepwater ports (33 U.S.C. § 1509(d)). Amongthe amendments to the Act is a provision exempting LNG terminals from thelimitation on the number “deepwater ports” that can be located in a designated“application area,” a provision applicable to oil terminals (33 U.S.C. §§ 1504(d)(4),(i)(4)). Additionally, a preexisting provision of the Act allows the governor of a stateadjacent to a proposed offshore LNG facility to have that facility license conform tostate environmental protection, land and water use, or coastal zone management

programs (33 U.S.C. § 1508(b)).

The USCG’s regulations regarding LNG facilities are codified throughout 33C.F.R., with major provisions in part 127. These regulations detail the requirementsfor siting applications, which include information about the proposed location,design, construction, and operation (33 C.F.R. § 148.109). NEPA analysis is ofteninstrumental in siting and safety-related decisions at specific, proposed facilities andis facilitated by the Mineral Management Service, the agency responsible for offshoreminerals extraction and the Outer Continental Shelf leasing program.100 Unlikeonshore facilities, the Coast Guard does not appear to require generally applicableexclusion zones for offshore facilities, but relies instead on case-by-case designation


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of safety zones.101 Additional USCG regulations include agency oversight of emergency procedures, security, fire protection, design and construction standards(33 C.F.R. §§ 127.109, 127.701-127.711, 127.601-127.617, 127.1101-127.1113,149.205).

liquefied natural gas (lng) import terminals: siting, safety and regulation

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